creating more inclusive economies: conceptual, measurement...
TRANSCRIPT
Creating More Inclusive Economies:
Conceptual, Measurement and Process Dimensions
By
Chris Benner
Gabriela Giusta
Gordon McGranahan
Manuel Pastor
With
Bidisha Chaudhuri
Ivan Turok
Justin Visagie
DRAFT
March 5, 2018
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Table of Contents
I. Introduction................................................................................................................................................. 1 II. What is an Inclusive Economy? .................................................................................................................. 2
Evolution of Concept ....................................................................................................................................... 2 Inclusive Economies Framework: Definitions and Dimensions .................................................................... 6 Inclusive Economies and the Sustainable Development Goals .................................................................... 9 Inclusive economies in context: National variations ................................................................................... 12
South Africa: From redistribution to inclusion ........................................................................................ 13 Colombia: From violence to inclusion ...................................................................................................... 15 India: Regional Diversity and Rural Development ................................................................................... 16 United States: From Just Growth to Diverse Epistemic Communities ................................................... 19
III. How do we measure an Inclusive Economy? ..................................................................................... 20 South Africa: Metropolitan Regions and Urban-Rural Dynamics ........................................................... 28 Colombia: City Data.................................................................................................................................. 28 India: Rural Development ......................................................................................................................... 28
Cross-Cutting Issues ...................................................................................................................................... 30 Spatial Dynamics ....................................................................................................................................... 30 Local, state and national connections ..................................................................................................... 31 Importance of power and focus on historically marginalized populations............................................ 31 Co-creation of data: .................................................................................................................................. 32
Benefits and limitations of indicators. ............................................................ Error! Bookmark not defined. Index or indicators: Many indicators vs. a sub-dimensional index: ............................................................ 23
IV. How to get an Inclusive Economy? ..................................................................................................... 32 Projects, Policies and Power: What is the virtuous (vicious) cycle that this triplet can generate? .......... 32 Colombia: what can we learn from cities?................................................................................................... 33 India: what can we learn from states? ......................................................................................................... 34 South Africa: what can we learn from the dynamic relationship between urban and rural areas?......... 33 United States: Metros ................................................................................................................................... 34
V. Conclusion ................................................................................................................................................. 34
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Executive Summary
Promoting inclusive economies has become an important theme in international policy discussions, but
there remain major gaps in our understanding of the components and determinants of greater economic
inclusion. The overall goal of this report is to help contribute to developing a more comprehensive and
coherent approach to promoting the development of more inclusive economies. Our starting point for
this particular inquiry is the framework developed by the Rockefeller Foundation, which defines an
inclusive economy as one that “expands opportunities for more broadly shared prosperity, especially for
those facing the greatest barriers to advancing their well-being”, and argues that there are five critical
characteristics that define an inclusive economy: equity, participation, growth, sustainability, and stability.
The first phase of this project saw the development of an indicator framework that tracks progress
towards greater economic inclusion along these 5 dimensions with subsequent 15 sub-categories and 57
separate indicators (a more comprehensive
review of the framework can be found here). In
our recent work we extend this analysis to sub-
national contexts, focusing on three key case
studies—rural-urban connections in South
Africa, urban development in Colombia and
rural development in India—while also
incorporating insights from our similar work in
the United States. While we include some empirical analysis of patterns of inclusion in our case studies
(in companion reports), the primary purpose here is conceptual and methodological, not empirical.
Through this work we hope to help understanding along three key questions, listed below, with some
preliminary cross-cutting conclusions:
1. What is an inclusive economy?
• Value of a broader, multi-dimensional approach: The multiple dimensions of this inclusive economies framework, particularly the addition of stability and sustainability, helps not just link equity and growth, but facilitates a more complex and systems orientation to understanding the economy, that incorporates greater attention to ecological and social well-being.
• Importance of flexibility and integration with context: While this framework seems to resonate in many different contexts and scales of analysis, it is also clear that there are many different ways to approach inclusion. The usefulness of this framework depends on how well it integrates with existing approaches in particular places
• Empirical research on relationships between dimensions will be important going forward: While there is some growing evidence in different contexts of the relationship between equity and growth, we did
A. Upward mobility for all.B. Reduction of inequality.C. Equal access to public goods and ecosystem services.D. People are able to access and participate in markets as workers, consumers, and business owners.E. Decision making transparency and accountability.F. Widespread technology infrastructure for the betterment of all.G. Increasing good job and work opportunity.H. Improving material well-being.I. Economic transformation for the betterment of all.J. Social and economic well-being is increasingly sustained over time.K. Greater investments in environmental health and reduced natural resource usage.L. Decision-making processes incorporate long-term costs.M. Public and private confidence in the future and ability to predict outcome of economic decisions.N. Members of society are able to invest in their future.O. Economic resilience to shocks and stresses.
INCLUSIVEECONOMIES
Expand opportunities for morebroadly shared prosperity,
especially for those facing thegreatest barriers to advancing
their well-being.
Expe
rienc
es o
f his
toric
ally
mar
gina
lized
pop
ulat
ions
Dist
ribut
ion
of p
ower
EQUITABLE
PARTICIPATORY
GROWING
SUSTAINABLE
STABLE
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not do a systematic literature review on empirical relationships between all five dimensions of this framework. This could be valuable work going forward
2. How can we better measure an inclusive economy? • The specific measurement framework can be applied in multiple contexts: We were able to
demonstrate in this work that the measurement framework of 15-sub-categories is useful at both a sub-national and national framework. The specific indicators we used varied—depending on data availability and quality—but at the sub-category level, the framework could be applied in many different contexts
• Spatial relationships are important, especially at a sub-national level, and are not always clear in indicators: Indicators at one geography can hide inequalities within that geography, but this is often more difficult to disaggregate at a local level than a national level. There are also important connections between geographies, such as between rural and urban areas or different cities within a country, that are important to understand in analyzing what indicators show.
• Individual indicators is better than an index in this context: While combining indicators into a single index can be useful in certain contexts, in this context we don’t think it is appropriate. Technically, there are too many unknowns about the quality of the data in multiple contexts, and there is little empirical evidence to support the types of weighting and scaling required to create an index across these dimensions. Politically we also think it is important to examine trends in different dimensions and the relationship between them, rather than simplify into an index.
• It is easy to neglect the importance of power and the experience of historically marginalized populations unless that is made implicit in the indicator framework: Inclusion requires particular attention to power relationships and the experience of historically marginalized populations, and while this perspective is embedded throughout the measurement framework, it is important to make it explicit and visible.
• Co-creation of data and indicators matters: The creation of indicators and gathering of data can be a source of conflict and exclusion, or a process for building collaboration and inclusion.
• Indicators are at least as valuable in stimulating conversations as documenting trends: Our work has shown that diverse and dynamics knowledge communities are important for growth and inclusion, and indicators can play a valuable role in stimulating conversations and building shared knowledge.
3. How can we get a more inclusive economy? • It is important to think about indicators in the context of theories of change: Indicators and indicator
frameworks always are embedded in an explicit or implicit theory of change. This particular framework is rooted in decades of research and development experience that indicates that all five dimensions are critical in some way to promoting more inclusive economies. At the same time, we acknowledged that there is only partial and still incomplete empirical evidence of the relative importance of any of the dimensions for any preferred outcome, or the extent to which there might be trade-offs versus synergies between progress along different dimensions.
• Broadly, people can be excluded for different reasons, which require different strategies to address: Broadly, people might be passively left out of economic opportunities, or they could be actively marginalized by more powerful interests in society. Changing these conditions might take place through common ground reasoning, or, depending on the circumstance, through conflict and bargaining.
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• Projects, Policies and Power can be a useful way to think about change: Projects can demonstrate what is possible and generate change at a community level. Policies can make projects and their impact widespread. Power is required to create policies and ensure they are implemented and enforced.
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I. Introduction
In its January 2017 global risk report, the World Economic Forum identified economic inequality and
societal polarization as two of the three most important dangers facing the globe. The world’s top
business executives and government leaders joined a growing chorus of international development
officials, economists, and policy advocates calling for countries to pursue more inclusive economic
development strategies. With Thomas Piketty’s 2013 book Capital in the Twenty-First Century and its
focus on growing inequality becoming a global best-seller—albeit perhaps one of the least read best
sellers of the year1--it seems that there is now a global consensus at many levels of the need for more
inclusive economies.
But what do we mean by an inclusive economy? While the concept seems intuitive, people use it to refer
to very different things. Some emphasize employment and patterns of income inequality, while other
focus more on wealth. Some focus on broader access to social services, or basic needs, or banking
services, while others emphasize participation, democracy and human rights. While there are clearly
many different dimensions to promoting more inclusive societies, and there is certainly value in a
diversity of approaches, there is a danger of the term becoming—in the words of former U.S. Secretary
for Labor Robert Reich—another one of those terms of public discourse that go directly from obscurity to
meaninglessness without any intervening period of coherence.
The overall goal of this report is to help contribute to developing a more comprehensive and coherent
approach to promoting the development of more inclusive economies. Our starting point for this
particular inquiry is the framework developed by the Rockefeller Foundation, which defines an inclusive
economy as one that “expands opportunities for more broadly shared prosperity, especially for those
facing the greatest barriers to advancing their well-being”, and argues that there are five critical
characteristics that define an inclusive economy: equity, participation, growth, sustainability, and stability.
With the financial support of the foundation, we have helped trace the intellectual heritage for
conceptualizing an inclusive economy this way, and developed a measurement framework—a set of sub-
categories and specific indicators--that could be adapted to multiple contexts to help stakeholders
measure progress towards inclusion along these five dimensions. Our work has included developing this
indicator framework at the level of the nation-state, but also applying this measurement framework to
1 https://www.wsj.com/articles/the-summers-most-unread-book-is-1404417569
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sub-national contexts, focusing on three key case studies: rural-urban connections in South Africa, urban
development in Colombia and rural development in India. We also integrate insights from parallel work
done on inclusive economies at a metropolitan scale in the United States.
The primary purpose of this work is not an empirical analysis of specific patterns of inclusion in our case
study locations. Rather our goal in the project was to develop improved insights on conceptual,
measurement and process dimensions of creating more inclusive economies. We did this by gathering
empirical data in each context within the measurement framework we developed and then engaging with
a range of experts in each context about inclusive economies and this framework. In companion
documents we share detailed information on the collaborative process and local participants in each
country, key empirical insights that emerged in each case, and discussions of country-specific insights into
processes of inclusive growth in each context. In this summary report, we highlight cross-country lessons
that provide insights to help answer three key questions:
• What is an “inclusive economy”?
• How can we measure an inclusive economy?
• How can we get a more inclusive economy?
We start by addressing the question of what an inclusive economy is. We discuss the evolution of this
term globally, what we see as the value added of the Rockefeller Foundation’s conception of an inclusive
economy, and how this conception relates to specific developments in a sub-national scale. We then turn
to a discussion of how to measure an inclusive economy, going into more detail of our measurement
framework and the lessons that emerged in trying to apply this at a sub-national context. We then turn
to a discussion of insights of ways of moving towards a more inclusive economy that emerged from our
work. We conclude with some recommendations for productive next steps.
II. What is an Inclusive Economy?
Evolution of Concept
In recent years, there has been a growing recognition that increasing inequality is a significant threat to
sustained economic growth. The idea that equity is good for the economy, however, used to be
controversial. Indeed, conventional thinking tells us that there is a tradeoff between the two; intervening
in the market might be appropriate for promoting social goals, according to this thinking, but there is an
inevitable loss of efficiency (Okun 1975). In the last decade or so, however, research has emerged from
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universities, think tanks, and even the International Monetary Fund and financial institutions like
Standard and Poor’s showing that inequality actually hinders growth (A. G. Berg and Ostry 2011; Eberts,
Erickcek, and Kleinhenz 2006; Irwin 2014). So how did this shift in thinking come about, and what was the
path to getting there?
In the decades following World War II, what we now think of as “conventional” thinking about the
relationship between equity and growth was established. In 1955, economist Simon Kuznets led the
advancement of the idea that some level of inequality, at least initially, is necessary for economic growth-
-which, once triggered, follows a natural cycle of wealth accumulation at the top that eventually trickles
down to lift up the poor (Kuznets 1955). Using what we now call the “Kuznets curve”--which plots
inequality related to stages of economic development on an inverted “U”--he theorized that in early
stages of development, both per capita income and income inequality rise as certain sectors of the
economy and population benefit from new forms of economic growth. At a certain point, however,
inequality decreases as the benefits of this economic take-off are spread more broadly. From this,
Kuznets and many others concluded that initial inequality is both a natural byproduct of growth as well as
a necessary factor to spur growth.
For decades, this trade-off and trickle-down theory was considered conventional thinking. Beginning in
the last few decades, researchers have challenged the idea of the Kuznets curve both theoretically and
empirically, with some noting that there is an almost complete lack of evidence to support the idea of the
Kuznets curve (Piketty 2014). As Kanbur (2000) explains in his review of post-war literature on income
distribution and development, the large body of empirical evaluations testing the relationship between
income distribution and income level does not validate Kuznets’ hypothesis. In fact, in the post-war era,
researchers found that in many developing countries, increasing inequality and poverty indeed
accompanied growth, but the predicted “turning point” never came. In addition, Rafael Ranieri and
Raquel Almeida Ramos’ literature review highlights evidence examining development in Hong Kong,
Singapore, South Korea, and Taiwan during the 1970s, 80s, and 90s, debunking the idea that society must
sacrifice equity for growth--as well as the idea that wealth will trickle down naturally from the rich to the
poor over the course of increased development (Ranieri and Almeida Ramos 2013).
From the critique of the trade-offs and trickle-down theory came two related schools of thought--one is
called pro-poor growth, which focuses on lifting the poor out of poverty, while the other is called inclusive
growth. The pro-poor growth perspective suggests that growth alone will not benefit the poor, so
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strategies to increase growth need to intentionally focus on reducing poverty.2 But while researchers
agree on the basic concept, there is little consensus on a standard definition of pro-poor growth or how
to measure it. As Ranieri and Almeida Ramos point out, the crux of the debate is “what benefitting the
poor means” (Ranieri and Almeida Ramos 2013, 5).
Three definitions of pro-poor growth rise out of the vast body of research: First, researchers like Ravallion
and Chen define and measure growth as pro-poor if it improves the condition of the poor in absolute
terms--and they develop a measure based on per capita income growth of people below the poverty line
to measure it (Ravallion and Chen 2001). Using their definition, it is possible to develop absolute measure
estimates of pro-poor growth that are independent of income growth rates at the top of the income
distribution. In other words, incomes at the top of the income distribution could be rising faster than at
the bottom, but a country could still have high levels of pro-poor growth if incomes at the bottom were
rising fast also.
A second definition, spearheaded by researchers like Kakwani and Pernia, argues that growth is pro-poor
if the income of the poor increases faster than that of the wealthy--meaning that relative income
inequality goes down (Kakwani and Pernia 2000). To accompany this definition, Kakwani and Pernia
developed the pro-poor index, which tells us the distribution of growth benefits among the rich and the
poor and non-poor--although it does not factor in the level of the actual growth rate.
A third conceptualization of pro-poor growth tries to extend the understanding of growth beyond income
measures, including both absolute and relative achievement in a variety of other important non-income
indicators of well-being. Grosse et al., for example, develop a non-income growth incidence curve and
demonstrate its use by measuring progress in education, health, nutrition, and a composite welfare index
metric, using data from Bolivia as a proof of concept (Grosse, Harttgen, and Klasen 2008).
In addition to these efforts to measure pro-poor growth, a second school of thought emerged focused on
inclusive growth. There are many similarities between pro-poor and inclusive growth (Ali and Son 2007),
and indeed the term inclusive in relation to growth occurred in Kakwani and Pernia’s (2000) description of
pro-poor growth. Inclusive growth, however, goes beyond pro-poor growth in several ways. First, it goes
2 In some ways, this perspective emerged as a reaction to the experiences of the macroeconomic structural readjustments of the 1980s and 1990s in the developing world; undertaken in the name of restoring fiscal balance and economic efficiency (as well as insuring repayment of debt to international financiers), the distributional damage was simply too large to ignore and led to consideration of new social welfare policies as well as more equitable growth strategies (Williamson 1990, 2003).
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beyond simply measuring growth to asserting that inequality is bad for things like political stability and
social cohesion; this suggests that the focus must not solely be on the conditions of the poor, but on the
relative conditions of both the poor and the better-off sectors of society (Aoyagi and Ganelli 2015).
Second, it stresses that all members of society should both be able to contribute to economic growth and
reap the benefits as well (Lanchovichina and Lundstrom 2009). This is a departure from pro-poor growth
which focuses specifically on benefits for the poor and so the inclusive growth also examines progress in
overcoming other factors for disadvantage, such as race, gender, and region (Klasen 2010). Third, at least
some variants of inclusive growth consider process as well as outcomes (de Mello and Dutz 2012). On the
one hand, this opens up the realm of consideration to the political and social aspects noted above. On the
other hand, this makes measurement more challenging: in the pro-poor growth perspective, one can
simply count up gains at the bottom (and weigh them in one of the three ways highlighted above) but in
the inclusive growth perspective whether those gains are achieved through authoritarian dictate or
democratic dispensation—very different processes—actually matters.
For those authors studying inclusive growth from an outcomes-focus, the emphasis is on the core
concept that growth should benefit all members of society. This is generally indicated by declining income
inequality, but can also span to non-income measures of well-being for disadvantaged groups such as
educational attainment and health care access (Thorat and Dubey 2013). Specific indicators from this
stream of inclusive growth literature often focus on growth in the gross domestic product coupled with
significant poverty or income inequality reduction (Habito 2009). In contrast, those authors more
concerned with process argue that growth is driven from the input of many people, including those
groups that are historically disadvantaged, and thus inclusive growth involves the creation of
opportunities and access to greater participation in the economy (Ali and Zhuang 2007). Oftentimes the
focus is on creating more productive and sustainable employment opportunities and making sure that
people from all groups can attain the skills and training needed for these employment opportunities
(Lanchovichina and Lundstrom 2009). A particularly interesting metric for measuring inclusive growth
under this type of framework was Ali and Son’s development of the idea of the social opportunity
function which measures the distribution of opportunities across the population, with a particular focus
on education and health opportunities (Ali and Son 2007).
Overall, definitions of inclusive growth coming from process-focused frameworks are generally more
comprehensive than those on the outcomes-focused side and depart more from pro-poor growth theory,
which have very outcomes-focused frameworks. Across researchers, the emphasis on participation and
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contribution from all groups takes on many forms, oftentimes spanning outside of traditional notions of
economic participation. Lanchovichina and Lundstrom (2009), for example, also incorporate opportunities
for investment, and Klasen (2010) delves more into non-income dimensions of well-being like education,
health, nutrition, and social integration.
Finally, no review of the literature would be complete without mentioning that the debate has now
shifted so dramatically that it is not simply researchers making normative argument that growth should
benefit the poor or be more inclusive; a set of researchers have both theorized and empirically
investigated the proposition that equity could actually lead to more sustainable economic growth (Benner
and Pastor 2015; A. Berg, Ostry, and Zettelmeyer 2012; Birdsall, Torre, and Menezes 2008; Bowles 2012;
Frank 2012; Stiglitz 2012). This perspective is still somewhat nascent but seems to be making headway in
the field; this paper, however, does not seek to review the evidence on whether inclusivity hurts or helps
growth but rather to focus on how inclusive economies have been defined and measured.
Inclusive Economies Framework: Definitions and Dimensions
The Rockefeller Foundation defines an inclusive economy as one that “expands opportunities for more
broadly shared prosperity, especially for those facing the greatest barriers to advancing their well-being”,
and argues that there are five critical characteristics that define an inclusive economy: equity,
participation, growth, sustainability, and stability.
These five broad characteristics are what make up the core of the inclusive economies measurement
framework we’ve developed. As suggested by the vast volume of literature, equity and growth are
fundamental to the advancement of greater economic inclusion, but they are not all-encompassing. Many
other elements and processes shape inclusion (and exclusion) and this framework makes an attempt to
consider such issues. It broadens the dialogue of inclusion beyond the equity-growth dichotomy to uplift
other equally important elements of an inclusive economy not as frequently discussed in the literature,
thus providing a more comprehensive point of departure from which to initiate conversations of inclusion
that consider important related issues of equity and growth but also of participation, sustainability and
stability.
When thinking of each of the five dimensions, it is also important to not see these as independent
categories but rather as interlinked dimensions, where the processes and outcomes within one
dimension have ramifications on how other dimensions perform. For example, an economy that
generates equal opportunities for all can contribute to the creation of a more active and participatory
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workforce, which in turn could generate greater economic growth; similarly, injustices that emerge
through social exclusion and historical marginalization could promote social, economic and political
instability, catalysts of less cooperative societies and abusive extractive economies. Thus, these
dimensions can be thought of as feedback loops that can generate dynamic virtuous (or vicious) cycles.
However, these relationships (or cycles), are not necessarily straightforward let alone linear.
Finally, there are two key cross-cutting issues that are embedded within multiple dimensions that are
worth lifting up. These issues emerge from recognizing that conceptually there are two quite different
reasons why people might face barriers to advancing their well-being: they could be passively left out of
economic opportunities (say, by a poor society that has few resources to accommodate physical
disabilities), or they could be actively marginalized or exploited by more powerful interests in society (say,
by racial discrimination a la apartheid in South Africa). As a result, change to expand opportunity can take
place through common ground reasoning (yes, we should overcome ableism) or, depending on the
circumstance, through conflict and negotiation (as with the anti-apartheid movement). Thus, in
considering progress towards more inclusivity across all five dimensions, it is important to pay particular
attention to the experiences of historically marginalized populations, and to consider how power
relations are distributed, in both formal and informal ways, across society.
With these details in mind, we now turn to a more detailed description of the five broad dimensions of
the inclusive economies framework. The five dimensions are conceptualized in the following way:
1. Equitable: more opportunities are available to enable upward mobility for more people. All segments
of society, especially the poor or socially disadvantaged groups, are able to take advantage of these
opportunities. Inequality is declining, rather than increasing. People have equal access to a more solid
economic foundation, including equal access to adequate public goods, services, and infrastructure,
such as public transit, education, clean air and water.
2. Participatory: People are able to participate fully in economic life and have greater say over their
future. People are able to access and participate in markets as workers, consumers, and business
owners. Transparency around and common knowledge of rules and norms allow people to start a
business, find a job, or engage in markets. Technology is more widely distributed and promotes
greater individual and community well-being.
3. Growing: An economy is increasingly producing enough goods and services to enable broad gains in
well-being and greater opportunity. Good job and work opportunities are growing, and incomes are
increasing, especially for the poor. Economic systems are transforming for the betterment of all,
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including and especially poor and excluded communities. Economic growth and transformation is not
only captured by aggregate economic output measures (such as GDP), but must include and be
measured by other outcomes that capture overall well-being.
4. Sustainable: Economic and social wealth is sustained over time, thus maintaining inter-generational
well-being. In the case of natural capital, inclusive economies preserve or restore nature’s ability to
produce the ecosystem goods and services that contribute to human well-being, with decision-
making incorporating the long-term costs and benefits and not merely the short-term gains of using
our full asset base.
5. Stable: Individuals, communities, businesses and governments have a sufficient degree of confidence
in the future and an increased ability to predict the outcome of their economic decisions. Individuals,
households, communities and enterprises are secure enough to invest in their future. Economic
systems are increasingly resilient to shocks and stresses, especially to disruptions with a
disproportionate impact on poor or vulnerable communities.
In an effort to bring more clarity and context to each of the dimensions, we broke each one down into 3
distinct sub-categories, for a total of 15 sub-categories. The overarching framework is represented in the
figure below. 3
3 A more comprehensive description of the indicator framework and description of the national indicators can be found in the report, Inclusive Economy Indicators: Framework and Indicator Recommendations.
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Inclusive Economies and the Sustainable Development Goals
This development of the concept of inclusive economies and this measurement framework has many
synergies with the evolution of thinking in global development agencies, which has had a similar evolution
from a primary focus on anti-poverty and social welfare approaches, to approaches that more specifically
address the structures and characteristics of the economy and dynamics of economic growth. This can be
seen by contrasting the Millennium Development Goals (MDGs), adopted formally in 2000, with the
Sustainable Development Goals, which were adopted in 2015 and now largely shape the post 2015
development agenda (see Figure 1 below). The MDGs included eight broad goals, with 21 specific targets
with various measureable indicators for each target. There is some attention to the economy embedded
within these broad goals. For example, under the goal of eradicating extreme poverty and hunger, target
1B was “achieve decent employment for women, men and young people”, and this includes specific
indicators related to GDP growth, employment rates, income levels and labor force participation. But the
emphasis in the MDGs is clearly on social development goals as a byproduct or outcome of economic
development, rather than a direct engagement with the structure of the economy and inclusion itself.
A. Upward mobility for all.B. Reduction of inequality.C. Equal access to public goods and ecosystem services.D. People are able to access and participate in markets as workers, consumers, and business owners.E. Decision making transparency and accountability.F. Widespread technology infrastructure for the betterment of all.G. Increasing good job and work opportunity.H. Improving material well-being.I. Economic transformation for the betterment of all.J. Social and economic well-being is increasingly sustained over time.K. Greater investments in environmental health and reduced natural resource usage.L. Decision-making processes incorporate long-term costs.M. Public and private confidence in the future and ability to predict outcome of economic decisions.N. Members of society are able to invest in their future.O. Economic resilience to shocks and stresses.
INCLUSIVEECONOMIES
Expand opportunities for morebroadly shared prosperity,
especially for those facing thegreatest barriers to advancing
their well-being.
Expe
rienc
es o
f his
toric
ally
mar
gina
lized
pop
ulat
ions
Dist
ribut
ion
of p
ower
EQUITABLE
PARTICIPATORY
GROWING
SUSTAINABLE
STABLE
10
Figure 1: The Millennium Development Goals (2000) and the Sustainable Development Goals (2015)
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Some 15 years later, when the Sustainable Development Goals were adopted in 2015, goals related
specifically to inclusion and the economy reached a much higher level of visibility and priority, particularly
in goals 8-10:
• Goal 8: Promote sustained, inclusive and sustainable economic growth, full and productive
employment and decent work for all.
• Goal 9: Build resilient infrastructure, promote inclusive and sustainable industrialization and
foster innovation.
• Goal 10: Reduce inequality within and among countries
The SDGs are also significant in their incorporation of sustainability into the mainstream of international
development strategies. This is in many ways the realization of the vision first articulated in the 1972 UN
Conference on the Human Environment, which emphasized that “the protection and improvement of the
human environment is a major issue which affects…economic development throughout the world” and
clearly recognized the links between poverty alleviation and protecting the environment. Thus, the SDGs
represent a comprehensive approach to development that incorporate economic, environmental and
social considerations in a single framework.
The inclusive economies measurement framework that we’ve developed has important synergies with
the SDGs, but also some distinctive differences. Where possible, specific indicators that we recommend
within our inclusive economies framework are drawn from specific indicators in the SDGs. The table
below shows how the different components of our Inclusive economies framework relate to the
sustainable development goals, and an appendix provides a detailed cross-walk between our
recommended indicators and SDG indicators. One distinctive advantage of the inclusive economies
framework, however, is that the five specific characteristics of an inclusive economy—equitable,
participatory, growing, sustainable and stable—are more intuitive and easier to remember than the 17
different sustainable development goals. We believe this makes it easier to use as a tool for engaging
with a broader sector of stakeholders and practitioners than the SDGs, which are more comprehensive
and geared towards development professionals but are harder for a more general public to engage with.
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Inclusive Economies Framework
EQUITY PARTICIPATION GROWTH SUSTAINABLE STABLE
A. Upward mobility for all
B. Reduction of inequality
C. Equal access to public goods
and ecosystem services
D. People are able to access and
participate in markets as
workers, consumers, and
business owners.
E. Decision making
transparency and
accountability.
F. Widespread technology
infrastructure for the
betterment of all.
G. Increasing good job and work
opportunity.
H. Improving material well-
being
I. Economic transformation for
the betterment of all.
J. Social and economic well-
being is increasingly
sustained over time.
K. Greater investments in
environmental health and
reduced natural resource
usage
L. Decision-making processes
incorporate long-term costs.
M. Public and private confidence
in the future and ability to
predict outcome of economic
decisions.
N. Members of society are able
to invest in their future
O. Economic resilience to
shocks and stresses.
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Inclusive economies in context: National variations
While the development of new understandings of inclusion and the economy have evolved at this global
scale, there have also been parallel evolutions at a national scale in countries across the globe. Since our
focus is on how this overall framework might be useful in different contexts, and the framework itself
pays a lot of attention to process and conversations, it is important to understand some of the more
subtle differences in the evolution of inclusive economy concepts in different countries. Here, we briefly
review these debates in each of our three key case studies, as well as the U.S.
South Africa: From redistribution to inclusion
South Africa has among the highest levels of income and wealth inequality in the world, with particularly
striking racial inequalities. According to World Bank Data, South Africa had a Gini index of income
inequality in 2011 of .634, by far the highest in the world.4 Following the first democratic elections in
April 1994, the country faced an urgent need to rebuild and transform the economy after years of the
apartheid regime’s racially exclusionary policies and international economic isolation. Promoting greater
equity—including both racial and spatial equity—has been a high priority goal for government policy since
1994. Apartheid policies reinforced dramatic differences between urban and rural areas, while
segregated apartheid cities generated extreme contrasts between poor black townships and wealthy
white suburbs in all South African cities. At a sub-national scale, one of the most important changes after
1994 was the restructuring of local government, dramatically reducing the total number of local
governments and creating metropolitan-scale regional governments in the largest urban areas of the
country (Hart 2002; Parnell et al. 2002).
For most of the post-apartheid period, South African development debates can be broadly characterized
as trying to promote economic growth and redistribution, primarily through state-policies, rather than a
specific focus on inclusion. This approach was made explicit in the national macroeconomic policy
framework called the Growth, Employment and Redistribution (GEAR) strategy that was adopted in 1996.
The South African state has developed a strongly progressive system of cash transfers and state spending
on public goods such as education, healthcare and basic services (Tseng 2013; Woolard et al. 2015). This
has resulted in considerable achievements in extending access to essential public services, such as
4 https://data.worldbank.org/indicator/SI.POV.GINI/
14
education, clean water, electricity, health services and housing, along with a massive roll-out of social
security through state-funded pensions, disability allowances and child support grants.
Progress on economic goals and on reducing income inequality, however, has been modest at best.
Unemployment rates remain high, at between 26-40% (depending on how it is measured), and as high as
55% among young people aged 15-24 (StatsSA 2016). In 2016, the number of people receiving social
grants actually exceeded the number of people with jobs by 10% (SAIRR 2017). There is widespread
recognition that overall inequalities have shifted little since 1994 and may even be rising (Ardington et al,
2005; Van der Berg, 2014; Bhorat et al, 2014). There is widespread evidence that the majority remain
excluded from meaningful participation in the economy. Only 40% of working age people in rural areas
actively participate in the labor market, and only 23% are in paid work.
As a result, policy discussions have increasingly turned towards goals of ‘inclusive growth’, a phrase that is
now prominent in domestic policy debates, though with little precision of what it means. One indicator of
the growth of interest in inclusive growth in the South African context is in the number of google scholar
citations that include both the phrases “inclusive growth” and “South Africa”, which has shot up from
only 340 citations published between 1995 and 2004, to over 11,000 publications in just the 8 years from
2010 to January 2018.5 Discussions of inclusive growth have contributed to stronger debates now
emerging about structural economic transformation. The more radical strands of this debate emphasize
restructuring patterns of ownership and control of the economy. More moderate approaches emphasize
policy interventions designed to overcome spatial inequality in multiple dimensions (including within
metro inequality, rural/urban integration, and addressing the economic dominance of Gauteng) and
promote greater integration of the informal township economy, as well as start-ups and small
enterprises.
Thus, given this focus on the need for structural transformation, while the inclusive economies
framework resonated well with South African participants in our convening, there was some push-back to
the focus on stability. Promoting stability was seen as potentially undermining attention to the need for
more structural change. Promoting economic resilience to shocks and stresses, for example, might simply
reinforce existing structural inequalities. This tension helped reinforce the need to look at individual
5 Search conducted on scholar.google.com on February 3, 2018, using the search term “inclusive growth” “South
Africa”.
15
dimensions of inclusivity, since, as we discussed above, understanding empirically the relationships and
potential trade-offs between different dimensions is critical.
Colombia: From violence to inclusion
Colombia, like South Africa, also has among the highest levels of inequality in the world—in fact in 2014,
according to World Bank statistics, it had the highest Gini coefficient of income inequality of any of the 64
countries for whom data was available that year, at .511.6 The causes of such high levels of inequality in
Colombia is in part linked with an extremely high level of land inequality—an estimated 0.4% of the
population owns 62% of the country’s best land (USAID 2017)—and in part to a long running civil war
fueled by conflict between the Revolutionary Armed Forces of Colombia (FARC) and paramilitary forces
established by landowners, local elites and drug traffickers. The conflict and unequal landholding has
resulted in substantial displacement of rural people. Currently Colombia has the second highest rate of
internally displaced population in the world--surpassed only by Syria—with some 15 per cent of the total
population internally displaced, an estimated 7.3 million people in 2017, (UNHCR 2017). This has
contributed to the country’s rapid urbanization and growth of large informal settlements, further
entrenching inequality.
Thus, since the height of the conflict in the 1980s, national development priorities have included a
significant focus on peace negotiations and political reconciliation, culminating in a final agreement in
2016 between the government and the FARC. A new constitution promulgated in 1991 was
accompanied by fiscal decentralization and an increase in social expenditures of the state. Sub-national
spending tripled in importance from 1986 to 2005, and by 2012, subnational government spending
accounted for 44% of total public expenditure and more than half of central government revenue was
distributed to subnational governments (Bird 2012; Lozano and Julio 2016). Since the early 2000s,
overall economic growth in Colombia has been relatively strong, averaging over 4% GDP growth per
year.7 The increase in social expenditures and decentralization seem to be contributing to some
reduction in poverty and inequality (Ramírez, Díaz, and Bedoya 2017). According to the National
Administrative Department of Statistics (DANE), overall poverty levels declined from 49.7% of the
population in 2002 to 28% in 2016, and extreme poverty declined from 17.7% to 8.5%.8 Income
6 See World Band GINI index data available here: https://data.worldbank.org/indicator/SI.POV.GINI/
7 Calculated from World Bank data: https://data.worldbank.org/indicator/NY.GDP.MKTP.KD.ZG
8 http://www.dane.gov.co/files/investigaciones/condiciones_vida/pobreza/pres_pobreza_2016.pdf
16
inequality also seems to have come down—from a GINI index of .587 in 2000 to .511 in 2015 according to
World Bank data.9
The continued high levels of inequality, however, have contributed to a growing interest in more inclusive
growth. A major strand of this approach has been through better understanding the multiple dimensions
of poverty. Starting in 2011 a new Multi-Dimensional Poverty Index, modeled on the work of Alkire and
Foster, became part of the official monitoring dashboard of the new National Development Plan (Alkire
and Foster 2011). This index combines measurements of household education conditions, youth
conditions (including both school attendance and access to health and nutrition), employment, health,
and housing conditions and access to public utilities (Angulo, Díaz, and Pardo 2016). The percentage of
people in multidimensional poverty by this measure has declined from 30.4% in 2010 to 17.8% in 2016.10
The causes of continued high inequality in Colombia are complex and multi-dimensional as well. Efforts
to promote a more inclusive economy tend to focus on the need to further expand and improve social
welfare programs, including increasing education enrolment rates for disadvantaged children, better
access to labor market programs and formal employment, labor law enforcement, and comprehensive
pension system reform to reduce old-age poverty (de la Maisonneuve 2017; OECD 2015). The spatial
dimensions of inequality are also a key concern, particularly the high levels of disparity between urban
and rural areas (Colombia National Planning Department 2010) .
In our discussions in Colombia, the overall inclusive economies framework resonated quite strongly with
participants. Participants seemed particularly enthusiastic about the attention to upward mobility in the
equitable category. What was also striking in Colombia was the weakness in civil society organizations.
The history of violence, displacement and government repression has resulted in a situation that many
people characterized as having led to a relative lack of community organizations and non-profit
development organizations.
India: Regional Diversity and Rural Development
From independence in 1947 through the late 1980s, India essentially pursued a mixed economy model of
state-led growth and development. National Five-Year Development Plans, especially in the early years,
focused primarily on economic growth, with the assumption that growth would reduce income poverty
9 See World Band GINI index data available here: https://data.worldbank.org/indicator/SI.POV.GINI/
10 http://www.dane.gov.co/files/investigaciones/condiciones_vida/pobreza/pres_pobreza_2016.pdf
17
(Jayal and Pai 2001). Much of the focus in the agricultural sector was on increasing production (through
Green Revolution technologies) and industrial strategies focused on import substitution industrialization.
From 1984 onward there was a decline in the import substitution and self-sufficiency policy in India. One
of the noted developments during this period was the gradual development of the Indian software
Industry. Active policy frameworks, such as, the Computer Policy in 1984 and the Computer Software
Export Development and Training Policy in 1986 and Software Technology Parks in 1990, were distinct
from the preceding years as government’s role was limited to only promotion and infrastructure provision
(Parthasarathy 2010).
As Patnaik and Chandhrashekar argue, the State’s responsibility to maintain public expenditure and
expansion of domestic market was financed by internal credit rather than taxes (Patnaik and
Chandrasekhar 1995). This coupled with a lack of any clear redistributive strategy and the State became
an instrument of elite enrichment. All these slowly created an acute deficit in the public finance and led
to the adoption of Structural Adjustment Programme (SAP) and economic liberalization in 1991. The
objective of this major economic was to increase efficiency of industrial production, attract foreign
investment, improve public sector (Aoyama and Parthasarathy 2016). The impact of these reforms on
poverty has never been a matter of consensus among Indian planners and economists. What is
noteworthy in the first decade after economic reform was increased growth and significant measures of
governance reform as evident in the 73rd
and 74th
Constitutional Amendment Acts, 1992. This Act granted
urban and rural local bodies, greater responsibility, and financial autonomy for effective self-governance
(Jayal and Pai 2001). The agrarian sector, however, experiences a decline in growth from 1990s till 2007
(Parthasarathy and Mohan 2013).
Governance reform followed by economic reform in 1991 held a very important position in the policy
domain. Towards the end of the 1990s, following the international trend, the discourse of development
strategy in Indian started to move towards ‘participatory development’, ‘inclusive human development’
(Currie 2001) and finally ‘inclusive growth’ as seen in the Eleventh Five Year Plan. During this time, the
role of the state was going through a shift as there was growing partnership with private sector and civil
society organizations. The National Human Development Report (2001) in its chapter on ‘Governance for
Human Development’ emphasized the role of ‘good governance’ in sustainable development and also the
changing role of the state in delivering welfare (Chaudhuri 2014). From the Tenth Five Year Plan (2002-
2007), there were two major shifts in the policy discourse: firstly, there was an increasing focus on
poverty reduction, creation of employment opportunities and skill development, improving health and
18
education for poor; secondly, market and civil society were considered to be partners in achieving some
of these goals, whereas the State’s role was to create and support a conducive political and economic
environment (Chaudhuri 2014; Aoyama and Parthasarathy 2016).
In the first three decades after economic liberalization, India has experienced rapid economic growth,
averaging over 7% a year from 2000-2016. The development strategy of the state has shifted more
towards institutional reform, infrastructure development and public provision for social development and
inclusive growth. Some of the schemes which hold testimony to State’s effort for social development are
National Rural Employment Guarantee Act in 2005, National Rural Health Mission launched 2005, Right to
Education Act 2009, Prime Minister’s Rural Road Programme (PMGSY) launched in 2000, Right to
Information Act 2005, Backward Regions Grant Fund 2006-07. To what extent, this strategic shift in
development policies has impacted both economic and social development in India is a matter of
measurement and debate. According to World Bank Data, India had a Gini coefficient of income
inequality of .354 in 2011, a level which is more equal than the United State (.404 in 2010), but there
remain substantial inequalities particularly between urban and rural parts of the country.
As part of this project, we attempt to understand address some of these changes by looking at data from
5 Indian states, which represented different geographical and political histories and had different
trajectories both in terms of economic growth and social development. These states are Andhra Pradesh,
Assam, Bihar, Kerala and Rajasthan. Our focus was to look at data that matched the indicators defined in
our framework and these indicators were oriented towards outcomes. However, during the consultative
workshop in Bangalore and Delhi, one of the main suggestions that came up was to look at development
policies and strategies to explain the larger processes through which such outcomes were achieved.
Taking this suggestion, in our India case study, we choose to focus on two of poorest rural states in India,
namely Bihar and Rajasthan. Bihar and Rajasthan used to be part of an acronym, BIMARU (Bihar, Madhya
Pradesh, Rajsthan and Uttar Pradesh), made popular by economist Bose to denote the state of poverty
and backwardness in these states (Bose 1988). Whereas Bihar and Rajasthan has moved much ahead in
terms of economic and social indicators in last one decade or so, there is still enough debate whether
they can be still be considered BIMARU (Bimar means sick in Hindi). However, our objective is not just to
measure how these two states have fared in terms of inclusiveness and extrapolate those findings to
understand India’s journey towards inclusivity. We rather try to use these two cases, in close comparison,
to project a much complex picture of how inclusion/exclusion has spanned in India. We then tie the
19
findings from these cases to understand our framework of measuring inclusive economies and how this
framework inform our analysis of the two subnational cases.
United States: From Just Growth to Diverse Epistemic Communities
In the United States, the national social compact that grew out of the New Deal era and helped ensure
relatively equitable and rapid growth in the 1950s and 1960s started to break down in the 1970s. Amidst
a growing economic crisis in the 1970s, the country took a strong turn towards neoliberal economic
policies with the election of Ronald Reagan in 1980, and inequality has been growing substantially and
consistently since then. Researchers have identified a range of factors contributing to this increase in
inequality—including skills-biased technological change, decline in unionization, deregulation in a range
of critical economic sectors, employment polarizing effects of increasing global trade, and declining state
investment in key social welfare programs. The spatial dimensions of inequality in the United States are
also of particular importance—between urban and rural areas, between the thriving east and west coast
cities and the ‘fly-over states’ in-between, and between different cities and neighborhoods in the
country’s highly segregated and jurisdictionally fragmented metropolitan regions.
The 2016 election made clear the three dimensional nature of the current crisis in the U.S. First, income
inequality has reached the highest level since at least the late 1920s, right before the great depression.11
Second, economic restructuring has hurt the economic fortunes of large parts of the country, which
combines with stagnant wages and rapid technological change to significantly increase levels of real and
perceived economic insecurity. Third, there is a growing fragmentation of American society, driven by a
variety of factors including increasing spatial segregation (particularly by income and ideology but also
high levels of racial segregation) and narrow-cast media, that is manifest in growing partisanship and
national political gridlock (Benner and Pastor 2015).
In this context, the most significant efforts to promote a more inclusive economy have been occurring at
a sub-national scale, particularly within metropolitan regions (Pastor, Benner, and Matsuoka 2009; Katz
and Nowak 2018) and a growing attention to state-level strategies (Pastor, Ito, and Wander 2016). In the
1990s, a strong strand of this work was framed around promoting “regional equity”, focused primarily on
redistribution, without specific attention to a vision of inclusive growth (Pastor, Benner, and Matsuoka
2009). Specific connections with more inclusive growth strategies started emerging in discussions of
11 See “Income Inequality in the United States” data series availableat https://eml.berkeley.edu//~saez/
20
more dense and pedestrian friendly ‘smart growth’ strategies (Blackwell and Fox 2004; Bullard 2007). A
growing body of literature, to which we have contributed, has also been documenting links between
social equity and economic growth (Benner and Pastor 2012, 2015; Stiglitz 2012; Reich 2016). While
there have been normative calls for more inclusive growth strategies (Treuhaft, Blackwell, and Pastor
2011), the concept of ‘inclusive growth’ is not a widely used term in the U.S.
We did not specifically try to apply oru inclusive economies measurement framework to sub-national
analysis in the U.S., though we’ve been involved in various other efforts to use indicators to measure
inclusion and to engage multiple stakeholders in discussions about how to achieve more inclusive
economic growth.12
The Brookings Institution, however, in partnership with the Rockefeller Foundation
developed a complementary measurement framework, building from the Rockefeller Foundation’s five
dimensional approach, and used this to measure inclusive economies in the 100 largest metropolitan
regions in the country.13
They found significant geographic and economic diversity in the regions that
measured both particularly high and particularly low on these five characteristics, but found that the
racial composition of metropolitan areas might be the most important distinction, pointing to the
importance of historical patterns of racial segregation and exclusion in explaining inclusion across all five
dimensions.
III. How do we measure an Inclusive Economy?
Developing a comprehensive multi-dimensional understanding of what an inclusive economy is an
important advancement, but that alone is obviously insufficient. It is also important for us to be able to
track progress we are making towards greater inclusion, to be better able to understand the relationships
between different dimensions of the inclusive economy framework we are proposing, and to be able to
identify complementarities and potential trade-offs. At what levels and in what circumstances might too
much equity be bad for growth? In what contexts might promoting stability reinforce existing
inequalities, and in what contexts might it promote greater equity? What are the relationships between
12 See for example the National Equity Atlas (http://nationalequityatlas.org/) and the Regional Opportunity Index
(http://interact.regionalchange.ucdavis.edu/roi/ ) 13
See https://www.brookings.edu/blog/the-avenue/2016/05/12/measuring-inclusive-economies-in-metropolitan-
america/ and https://www.brookings.edu/blog/the-avenue/2016/05/18/a-metro-map-of-inclusive-economies/
21
greater participation, equity, and growth? These are the kinds of questions that we ultimately hope it
would be possible to answer more robustly with this framework.
The figure below lists the specific proposed indicators we developed for use at a nation-state level. These
indicators were chosen after a review of more than 30 major indicator initiative around the globe as
providing a comprehensive view of inclusivity across all 5 dimensions and 15 sub-dimensions of our
framework. We know that specific data is available at a national level for a large number of countries
across all of these indicators, and that there is potential for gathering the same or similar indicators
across multiple scales and contexts.
Below, we will discuss specific lessons we learned applying this case study framework in each of our sub-
national case study contexts—South African regions, Colombian cities, and Indian rural states. We start
first, however, with some more general discussions about indicators and how we think about their role in
understanding economic change, and about the relative trade-offs of looking at individual indicators
versus developing a single index that would combine these multiple indicators.
22
23
Inclusive Economy Indicators: Measuring Progress, Improving Understanding, Promoting
Conversations
The purpose of indicators, of course, is to measure change along a chosen dimension. What percentage
of people are employed, for example, or what proportion of young girls finish elementary school.
Indicators are often presented as objective measures, and yet the meaning of any particular indicator can
be subject to interpretation. Is a high proportion of people in informal employment, for example, a
negative sign of the lack of formal sector employment opportunities, or a positive sign of the dynamism
and creativity of micro-entrepreneurs? Is an increase in women members of parliament a sign of
improved gender equity, or simply a sign of more subtly entrenched elite domination? Or both?
Thus, comprehensive indicator initiatives and even individual indicators are always embedded in some
explicit or implicit theory of change—a belief about what is important to measure in the world. As we
pointed out in our previous report, some indicator initiatives—such as the Asian Development Bank’s
Framework of Inclusive Growth—have an explicit theory of change built into their indicator framework. In
that case, they develop two simple outcome measures related to reduction of poverty and inequality
(assessed using both monetary and non-monetary indicators), and concentrate on three pillars—
economic growth, social inclusion, and social safety nets—underpinned by indicators measuring a
foundation of good governance and efficient institutions. Other indicator initiatives, such as the OECD
Initiative on Inclusive Growth, have less explicit theories of change. In this case, they emphasize the role
of indicators within broad thematic areas—employment, education, poverty, health, civic engagement,
etc.—without explicitly discussing how they see those thematic areas being related to each other. And
yet the very selection of certain thematic areas and not others reflect an implicit theory of change related
to priority areas of attention. Furthermore, even individual indicators have implicit theories of change
embedded within them. For example, whether an indicator of poverty is an absolute indicator (e.g., less
than $1.50 a day) or a relative indicator (e.g., less than half the median income), represents very different
understandings of the importance of social relations versus absolute deprivation in shaping experiences
of poverty. Similarly, an indicator of the number of people who are employed implicitly values those in
paid employment while undervaluing unpaid but economically valuable labor, more often performed by
women and unpaid family members. It is important to always think about indicators in the context of
theories of change, and whether or not that theory of change is explicitly (or implicitly) embedded in the
indicator framework.
24
This is not to suggest that simple indicators, without clearly identified processes of theories of change
associated with them, are not useful. To the contrary, they can facilitate discussion across multiple
constituencies about the factors that might be leading to those conditions. They can lead to new
hypotheses about causal connections between different outcomes. They might surface important issues
that might not emerge in a more directed approach. Thus, as we emphasize in multiple places in this
report as well as our previous work, one of the most important components of indicator initiatives is their
ability to spark conversations between key stakeholders, often leading to better and more shared
understandings of conditions and progress. This also points to the important of paying attention to the
process of indicator development. Ultimately if we are to achieve more inclusive economies, we must
develop some shared metrics for tracking them and a shared understanding of what is being measured.
We mention these issues of theory of change and process of indicator development because they are
critical to understanding our experience in working with local partners in our three case study sites. In
each case, we were clear to present the inclusive economies measurement framework as one that had an
only partially formed theory of change. The more clearly formed component of the framework, rooted in
the decades of research and development experience highlighted in the previous section, is that all five
dimensions are critical in some way to promoting more inclusive economies. At the same time, we clearly
acknowledged that this framework was a normative framework that was in the process of development,
and that there is only partial and still incomplete empirical evidence of the relative importance of any of
the dimensions for any preferred outcome, or the extent to which there might be trade-offs versus
synergies between progress along different dimensions.
We also emphasize that as inclusive a process as we tried to pursue in developing the indicator
framework, that we were much less knowledgeable about local dynamics and processes than our local
partners. Thus, rather than focusing only on what our data analysis indicated about levels of inclusion,
we were at least as interested in the extent to which this framework resonated with our partners’ own
work on inclusion, how this framework might help contribute to discussions about how to promote a
more inclusive economy, and how the framework might be improved.
.
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Index or indicators: Many indicators vs. a sub-dimensional index:
One of the most consistent issues that emerged in this context was why we didn’t develop an inclusive
economy index that could combine multiple indicators into a single measure that would make it easier to
track progress. This could conceivably be done at the level of the entire framework or at each of the five
dimensions, so that it would be possible to have both an overall inclusive economies index, and an index
of equity, participation, growth, sustainability and stability. There are many indicator efforts that do
calculate a comprehensive index. The Human Development Index14 of the United Nations Development
Program is perhaps the most widely known, but there many others, including the World Economic
Forum’s Inclusive Development Index15, the Social Progress Index16 launched by Michael Porter but now
driven by a global network of partners, the Global Multidimensional Poverty Index 17
developed by the
Oxford Poverty and Human Development Initiative, and the Economic Commission for Africa’s African
Social Development Index18, to name just a few well known examples.
There are reasons why developing an index can be valuable. It certainly makes it easier to communicate
results to a wider spectrum of stakeholders. It can focus attention and help build consensus towards
achieving a high priority goal. And, through the ease of communicating results through media and other
broad communication channels, it can help build a broad social and political constituency for greater
inclusion and social progress. In other contexts, we have also been directly involved in developing indices
out of multiple detailed indicators.19
There are, however, two key concerns we had in this case that led us to not propose an inclusive
economies index. The first concern is technical. There are many detailed methodological issues involved
in both indicator selection and combination in the process of index construction. Which indicators to
include, how they are standardized, how they are weighted in the index, and how they are combined are
all critical decisions to be made in developing an index, with very substantial implications for the results.
As a result, it only makes sense to develop an index in contexts where there is substantial research
documenting the relative importance of different components of an index in explaining the outcomes,
14 http://hdr.undp.org/en/content/human-development-index-hdi
15 https://www.weforum.org/reports/the-inclusive-development-index-2018
16 https://www.socialprogressindex.com/
17 http://ophi.org.uk/multidimensional-poverty-index/
18 https://www.uneca.org/sites/default/files/PublicationFiles/asdi_report_technical_eng.pdf
19 One author (Benner) for example, helped develop the Regional Opportunity Index in California, which combines
indicators of education, the economy, housing, transportation, health/environment and civic engagements into a
comprehensive index. See http://interact.regionalchange.ucdavis.edu/roi/
26
and in which there is high quality and comparable data to make the calculation of an index meaningful. In
the absence of those conditions, producing an index becomes simply a statistical exercise that can be
highly and perhaps even dangerously misleading. In the context of the concept of an inclusive economy
we’re developing, there is still little empirical evidence that can effectively guide the construction of an
appropriate index. Furthermore, since we are trying to develop a flexible framework that could be used
to facilitate discussion and progress towards inclusive economies in multiple contexts, the quality and
comparability of data across these contexts is also of concern.
But there is a second more political reason to be concerned about the use of an index in this context. By
definition, indices simplify complex issues and processes into a single number. Promoting inclusive
economies, however, is a complex and multifaceted process. There are potential trade-offs that might
exist between different dimensions of an inclusive economy, especially at different levels. There is
growing evidence, for example, that high levels of inequality are bad for economic growth, but too little
inequality might be bad for economic growth if it undermines incentives for hard work and innovation.
The specific relationships between different components of this framework might differ substantially
across different countries and regions, and we wary of simplistic solutions to complex problems. Thus,
we think it is important, at least at this stage, not to create an inclusive economy index.
Applying the framework at a subnational scale
In our efforts to apply this measurement framework at a subnational scale, we had two major goals. The
first was to explore the extent to which data is available at a sub-national scale within the different
components of the framework. The second was, in actually gathering data and using this to analyze
patterns of inclusion at these sub-national scales, to develop a clearer understanding of the potential and
challenges of using this framework across multiple scale and contexts, and to modify the framework as
appropriate to fit these different contexts.
In selecting possible case studies, we had several key criteria: the countries had to be large enough to
allow for substantial comparison of different places within the country: there had to be sufficient data
available to allow for meaningful quantitative analysis; and we wanted one case study in each of the three
major regions of the global south (Latin American, Africa and Asia) to facilitate engagement with different
communities of scholars and inclusive economy stakeholders. We also wanted a range of characteristics
of levels of urbanization, strength of rural economy, levels of rural-urban migration and total income.
Finally, across the three case studies, we wanted to be able to analyze patterns and processes of inclusion
in urban, peri-urban and rural contexts.
27
In South Africa, our focus was primarily on metropolitan regions, with a particular interest in rural-urban
connections. In Colombia, we focused exclusively on cities. In India, we were primarily interested in rural
development, but as we’ll discuss in more detail below, there are significant empirical and theoretical
challenges. In companion reports on each country, we provide detailed analyses of our experiences in
applying this inclusive economies measurement framework in each case. In what follows here, we first
summarize for each country some of the important data issues that emerged in each country and then
lift-up some of the cross-cutting issues that emerged in our work.
Table 1: Selected Characteristics of Case Study CountriesColombia India South Africa
DemographyPopulation, total (millions) 48.2 1,311.1 54.5Dependency ratio, young age (0-14) (per 100 people ages 15-64) 35.4 43.9 44.5Dependency ratio, old age (65 and older) (per 100 people ages 15-64) 10.3 8.6 7.7Urban population (%) 76.4 32.7 64.8
Income, Poverty & InequalityGDP per capita (2011 PPP $) $12,988 $5,730 $12,390Estimated GNI per capita, female (2011 PPP$) $10,215 $2,184 $8,795Estimated GNI per capita, male (2011 PPP$) $15,389 $8,897 $15,489Income inequality, Gini coefficient 53.5 35.1 63.4Population living below income poverty line, PPP $1.90 a day (%) 5.7 21.2 16.6Population in multidimensional poverty (%) 7.6 55.3 10.3
HealthLife expectancy at birth, female (years) 77.8 69.9 59.5Life expectancy at birth, male (years) 70.7 66.9 55.5Infant Mortality Rate (per 1,000 live births) 13.6 37.9 33.6Public health expenditure (% of GDP) 5.4 1.4 4.2
EducationAdult Literacy Rate (% ages 15 and older) 94.7 72.1 94.3Government expenditure on education (% of GDP) 4.7 3.8 6.1Mean years of schooling, female (years) 7.6 4.8 10.2Mean years of schooling, male (years) 7.5 8.2 10.5
Trade, Financial Flows, and CommunicationExports and imports (% of GDP) 39.0 48.8 62.8Concentration index (exports) 0.459 0.175 0.119Remittances, inflows (% of GDP) 1.60 3.32 0.26Internet users (% of population) 55.9 26.0 51.9Mobile phone subscriptions (per 100 people) 115.7 78.8 159.3
Source: United Nations Development Program 2016 Human Development Report Country Profileshttp://hdr.undp.org/en/countries
28
South Africa: Metropolitan Regions and Urban-Rural Dynamics
South Africa has a rich repository of readily accessible secondary data that enable indicators in this
framework to be populated in most of the sub-categories. The specific indicators used were quite
different from the indicators used in our national-scale recommendations, but the conceptual categories
fit well, and there were reasonable specific indicators available for most sub-categories. There are some
limitations at the city-level because the data is simply unavailable or the degree of accuracy is diminished
by the sample sizes. A big gap at the city-level is reliable data related to economic output, value added,
trade and investment, including sectoral breakdowns. This is a serious weakness in the current statistical
landscape in South Africa, albeit one that the National Treasury and other stakeholders are trying to
address in various ways.
One useful feature of the StatsSA surveys is that it is possible to general a variety of spatial and city-level
data. Thus, across nearly all categories of the framework, we were able to generate some indicators for
the 8 largest metropolitan areas, and then compare these figures to other urban areas, rural areas and to
South Africa as a whole. This data was able to show a stark spatial hierarchy, with multiple indicators of
inclusion showing significant socio-spatial divides between the largest urban areas and rural areas in
particular. One big gap was in finding data for the ‘sustainable’ dimension, in which many of indicators for
‘Greater investments in environmental health and reduced natural resource usage” were not easily
available at these sub-national scales.
One particularly useful data source in South Africa that we utilized is the National Income Dynamics
Study, a longitudinal/panel survey which interviews the same individuals every two years starting in 2008.
This was extremely useful in being able to identify striking improvements in poverty levels of those who
moved to metropolitan areas, compared to those who remained rural.
Colombia: City Data
There is a growing and strong network of local initiatives in Colombia working to create accessible data at
a subnational level to help generate information and track progress towards greater urban inclusion. This
is partly because cities are having to lead much of the inclusion work prioritized in the post-conflict
agenda. Central to this work is the availability and accessibility of indicators and indicator frameworks
that generate reliable, unbiased, comparable and public data on important urban development issues,
and thus help facilitate and identify patterns of equity and inclusion and areas needing further
improvement.
29
The Red de Ciudades Cómo Vamos (RCCCV) initiative has helped champion much of this work.
Implemented in 1998 by the Chamber of Commerce of Bogotá, El Tiempo, and Fundación Corona, RCCCV
was first established in the city of Bogotá to assess changes in the quality of life of its residents in
accordance with the city’s development plan. It later expanded into a wider cities-monitoring network
starting with the addition of Cali and Cartagena in 2005, Medellin in 2006, and 10 more cities joining from
2007-2017.
The objectives of RCCCV can be summed up within four important activities: (1) To generate more
reliable, impartial and comparable information on issues of city development, quality of life and citizen
participation; (2) To facilitate the generation and exchange of knowledge to help further development
plans and specific programs of interest among local governments; (3) To use available data to enrich and
strengthen the initiatives of the network and of each city; and (4) To promote the exchange of good
practices and processes.
To help further these objectives, RCCCV established Ciudatos, the first open data platform developed by
civil society in Colombia which focuses on building knowledge about and for cities. Technical and
perception data are available on a wide array of urban development issues and are collected through
objective and subjective surveys. The objective indicators compile quantitative data on quality of life
issues in each city, while the subjective indicators bring together information gathered through the
Citizen Perception Survey, applied annually in each city, to complement the quantitative data gathered
through objective indicators. City-specific data is available for 15 of Colombia’s major cities, while
comparable indicators are also available for 5 out of the 15 cities.
India: Rural Development
Like South Africa, India also has a robust selection of readily available data from a wide variety of national
surveys and periodic censuses. Applying the inclusive economy framework to look at rural development
in India, however, was substantially more challenging than in South Africa. India is obviously a much large
country and population. Data from national survey and censuses is most easily accessible at a state level,
but 10 of the 29 states in the country have more than 50 million people and in many ways are as diverse
within each state as the two other country case studies we examined. It is possible to gather many
indicators at a sub-state level, but this level of data gathering and analysis was beyond the scope of this
project. Thus, we were limited to looking at state-level indicators.
30
As described above, our initial focus was on five predominantly rural states: Andhra Pradesh, Assam,
Bihar, Kerala and Rajasthan. Even though the majority of the population of these states live in rural areas,
each state also has large urban areas where 20-40% of the population lives. Some of our key indicators
are broken down by rural or urban populations within these states, but many others simply report on the
overall conditions across the state. This is also partially why we ultimately focused on just two states:
Bihar (total population 103 million, 88% rural) and Rajasthan (68 million, 75% rural). Nonetheless, we
emphasize that there are strong rural-urban linkages, not just in the data, but in the nature of social and
economic progress in these states.
In addition, since we were focused on rural development in what are predominantly agricultural regions
of India, we expanded the inclusive economy measurement framework to look at a number of key
indicators related to rural development, as shown in the table below.
Table: Sub-categories and Indicators of rural development
Access to Irrigation Share of irrigated land for all crops
Share of irrigated land by water source
Water availability and variability Variability in annual rainfall
Source of drinking water
Crop Intensity and Land Quality Cultivated area as a percentage of total land in operational holdings
Soil Fertility
Cross-Cutting Issues
Spatial Dynamics
One important spatial dynamic that is clearly evident as much at a national level as it is at a sub-national
level is the ways that indicators at one geography can hide significant inequalities within that geography.
But determining this within-region inequality is more challenging at a sub-national scale than at a national
scale. This is primarily due to the more limited data at a sub-national scale, which makes it more difficult
to disaggregate by geography, much less by population sub-group.
A second important spatial dynamic is that, given the greater levels of within-country mobility than cross-
border emigration, there are important connections between geographies that are critical to understand.
31
These can be hidden with looking at indicators for a single geography. High levels of displaced persons
and urban poverty in Colombian cities are there precisely because of high levels of violence and
inequalities in land ownership in rural areas. High levels of circular migration in both South Africa and
India make rural and urban economies highly connected.
A third spatial dynamic that emerges in sub-national analysis has to do with the importance of fully
understanding the reasons for different patterns of inclusion. For example, in our analysis of inclusion in
South African cities, the Cape Town metro has better indicators of inclusion across multiple categories.
The reason for this, however, is not that it has had a more inclusive economy, but rather that, under
apartheid, it was more successful in excluding Africans, the most marginalized racial group in the country.
Local, state and national connections
Another important issue that emerges in sub-national measurement has to do with the importance of
understanding connections between local, state and national dynamics. Some indicators are more
meaningful at certain levels than at other levels, and this can differ from country to country. For
example, our unit of analysis in India was at the state level, but many people felt measures of
participation at a state level were much less important than participation at a panchayat (village) level,
and even at a district level, which are an important level for setting development priorities and for
providing road construction, education and public health. Similarly, many indicators of sustainability,
particularly those related to resource use and energy intensity, or more meaningful at a national level
than a local level.
This points to the value of explicitly linking indicator development with a theory of change. Indicators are
most meaningful at a geographic scale that matches the processes that are most important for shaping
outcomes. This can relate to the specific powers and functions of different tiers of government. But the
formal boundaries of local governments frequently don’t correspond to broader economic processes,
which are often more rooted in broader metropolitan dynamics and global flows, or to migration and
immigration patterns.
Importance of power and focus on historically marginalized populations.
Inclusion requires particular attention to power relationships and the experience of historically
marginalized populations. This perspective is embedded throughout the measurement framework, and
there are some indicators that are explicitly designed to measure power relations and the accountability
32
of decision-makers. But it is still far too easy to neglect the importance of the experience of historically
marginalized populations, unless this is placed front and center in the analysis. In our work in India, for
example, we didn’t spend enough time analyzing data on the different experiences and conditions of
scheduled castes and scheduled tribes (the various officially designated groups of historically
disadvantaged people in India). Similarly in Colombia, there are very distinct racial differences that are
not easily distinguished in the data, unless there is deliberate attention to developing those indicators.
Co-creation of data:
In our work, we have found that indicators are at least as valuable in stimulating conversations as
documenting trends. In our work in the U.S., we’ve shown that diverse and dynamic knowledge
communities are important for growth and inclusion, and indicators can play a valuable role in stimulating
conversation and building shared knowledge (Benner and Pastor 2015). This resonated quite strongly in
our case-study work in other countries too, particularly in Colombia and South Africa. In our interactions
with our Colombian partners, what seemed to be of most interest was how to generate a “knowledge
community” that could actually use the data to make change. There was great interest in how such
communities get created, build bridges, and sustain dialogue between unexpected allies.
Our Colombian partners also strongly pointed to the reality that the creation of indicators and gathering
of data itself can be a source of conflict and exclusion, or a process for building collaboration and
inclusion, depending on how the indicators are developed and the stakes involved in measuring change.
In other words, how one develops measures of an inclusive economy is as important as how one
measures an inclusive economy.
IV. How to get an Inclusive Economy?
[note: this section will be fleshed out in much more detail after our Bellagio convening.]
This project was not specifically designed to try to analyze the processes that can lead to more inclusive
economies in any of the contexts we looked at. Such an effort requires significantly more in-depth
research in each place, which was beyond the scope of this project. Furthermore, the five dimensional
framework for understanding inclusive economies remains quite new. There is certainly decades of
research and development experience that indicates that all five dimensions are critical in some way to
33
promoting more inclusive economies. But at the same time, there is only partial and still incomplete
empirical evidence of the relative importance of any of the dimensions for any preferred outcome, or the
extent to which there might be trade-offs versus synergies between progress along different dimensions.
Nonetheless, this research, intellectual engagements and discussions that were part of this project did
provide some insights into ways of developing more inclusive economies.
Projects, Policies and Power: What is the virtuous (vicious) cycle that this triplet can
generate?
An effective lens for understanding processes to promote more inclusive economies is the project,
policies, and power triplet (Pastor, Benner, and Matsuoka 2009). Projects are individual innovations that
can help demonstrate that more inclusive economies are possible. [examples of innovative projects will
be fleshed out here]
Policies can help turn projects into more widespread practice.
Power is required both to develop and create projects, and to move policies into place. It is also
important for ensuring the policies are implemented and that decision-makers (in both the public and
private sphere) are held accountable.
Country Specific Insights
South Africa: A focus on cities and regions
Our work in South Africa identified a number of overarching principles or themes. Most important is that
changing the country’s development path necessitates questioning the status quo and challenging vested
interests. Three other key principles stood out: first, the principle of active citizenship or participation,
particularly from those populations and communities historically excluded. Second, urbanization has a
important transformative power, as cities concentrate opportunities for economic inclusion. Third, it is
critically important to strengthen collective action by institutions across different sectors of society and
the economy.
Our research also helped identify four more specific policy priorities for inclusive growth. First, there
needs to be a greater emphasis placed on the physical foundations of inclusive cities, especially land,
infrastructure and public spaces. Second, housing and human settlements policy needs serious attention
because it currently tends to undermine both inclusion and growth objectives. Third, greater emphasis is
34
needed to support the start-up and growth of small enterprises. Fourth, human development needs to
be pursued with renewed vigor, commitment and imagination, with a particular focus on education and
training throughout the life course, starting with early childhood programs and extending through school,
tertiary education and vocational training.
Colombia: Local Indicators and Process
Our work in Colombia identified some particularly important challenges to promoting inclusion, including
the difficulties of overcoming the legacies of violence in the country, as well as continued challenges in
addressing gender and race-based inequalities. But Colombia was also striking for the relative strength
and particular structure of their local indicator initiatives and the ways indicators are being used to
develop greater consensus about developmental priorities. The local indicator framework developed by
RCCCV is particularly striking for being systematic, for being led by the private sector (despite being
rooted in cities!), for the clear model of replicability and quality control that makes it relatively easy for
new cities to join the Cómo Vamos network, and for the ways their indicators initiatives have evolved
over time and place, as different entities have become involved.
What still remains unclear is how these indicator initiatives are being used to engage international
organizations, national institutions, local authorities and community leaders to work together to generate
change. In our interactions in Colombia, what interested participants most was not the data collection
itself, but the notions of “epistemic communities” that underlie the promotion of inclusive economies.
There was great interest in how such communities get created, build bridges, and sustain dialogue
between unexpected allies. While this work was focused on whether a common framework could be
applied across countries to stir measurement at a sub-national level, the next phase of this research
should focus more on those processes and mechanisms that forge the will for action to not just measure
but actually achieve an inclusive economy.
India
United States
V. Conclusions
35
36
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